Pathways to the Enterprise State

Summary

Looking back, it was inevitable, as the size of government rapidly expanded, and public payments and services came to form their own prodigious social economy, that ongoing social enterprises would emerge with a life of their own. The unexpected factor in our time is that social enterprises and businesses have emerged with a double or triple benefit. They are potentially self sufficient, solve social problems and create opportunities for economic participation. In this, the role of the State changes from ongoing supporter to mentor and investor. Perhaps the central social services question in our time is: how far can we develop social enterprises and businesses? Is it possible that social enterprises and social businesses themselves may one day replace social payments as a means of supporting disadvantaged individuals and communities? Is it possible to envision a social enterprise state? This report, with some qualifications, finds for the affirmative in relation to these questions.

Social enterprises are a significant way of giving back power and opportunities to communities. Social enterprises create constructive, challenging work and economic participation as opposed to passive welfare payments which, over the long term, create dependency and demoralization. This report surveys social enterprises and social businesses in relation to disadvantaged communities in contemporary Australia and internationally. It examines their origins, context, role and contribution to supporting disadvantaged communities. It also offers suggestions for supporting and replicating outstanding examples of social enterprise. In all of this, it surveys possible pathways, sometimes meandering, to a social enterprise state of the future.

Australia, uniquely amongst advanced western countries, has a 100 year old tradition of national corporate charitable provision. The other comparable country is the United States. However, unlike the US, Australia combines private charitable services with award wage provision and universal public social payments. This combination has created a greater level of citizenship equity than in the US. Over the course of the twentieth century, Australian national corporate "third sector" agencies such as St Vincent de Paul, the Brotherhood of St Laurence, Mission Australia, the Salvation Army, that were generally social enterprises in themselves, became "social welfare sweepers" that developed to support what has been called "the wage earners welfare state". Not enough historical work has been done on these important institutions when compared with the literature on the role of trade unions, industrial legislation and social payments.

The existence of Australia’s unique "third sector", along with Australia’s predominant social welfare focus on income security payments, makes the development of a new series of Australian social enterprises more practical than in other national contexts. The third sector is already starting to function as an auspicing and mentoring sector and restructured social payments could be used to create start up funds for social enterprises. Individualised social payments can be bundled together, and savings from the benefits of social enterprises can be used to re-invest in ongoing enterprise. Though it has been slow to develop its social enterprise sector, Australia has the major building blocks in place to support the development of a social enterprise state.

This report considers a new set of accounting practices which measure and monetise the social and economic returns of social enterprise and social business. Armed with this methodology, governments can assess the merits of social investments, third sector agencies can create portfolios of social investments that have particular goals and outcomes and social businesses and social enterprises can themselves improve their social outcomes. The Roberts Enterprise Development Fund which have pioneered this new methodology argue for a new strategy that is as relevant to government as it is to the third sector. ‘Old welfare and philanthropy is concerned primarily with making grants and engaging in fundraising. Success is defined as the amount of perceivedvalue, by the number of grants given and by the size of one’s assets. ..New social investment welfare and philanthropy is concerned singularly with the value accrued measured as social returns (that is, benefits to society)’.(The Roberts Enterprise Development Fund 2002)

This report recommends that the Federal government support third sector agencies in the process of creating social enterprises and further reforms social payment systems in the areas of unemployment and disabilities so that stronger pathways can be forged towards social enterprise opportunities that meet new social returns standards.

It also recommends that the Federal government take the lead on social enterprise and social business creation through the development of a three stage national development process in which communities are offered support for the successful development of social business plans, and then providing they can provide third sector mentors and supporters and meet other criteria, further enterprise development support. The third and final stage is to provide a one-off partnership grant to allow the enterprise to reach self sufficiency, or in the case of social businesses, ongoing profitability, through purchases of capital equipment, marketing and management infrastructure. At each stage applicants would need to satisfy an independent panel of social enterprise and business enterprise experts.

The funding for successful social enterprise applicants reaching the three stages would be up to $5000, $20,000 and $50,000 respectively. It is estimated that 20,000 social enterprises could be created within five years with employment creation of up to 100,000 and subsequent social expenditure savings of more than $100 million. Based on this projection the scheme could be funded without any additional spending through savings from Federal government social expenditures and with further potential savings being developed through reformations of existing welfare infrastructure and re-investment in social enterprise development.

This report also recommends the development of a "mezzanine" trading floor exchange for social businesses in Australia to ensure strong investment in social enterprise from social funders and private commercial investors. Entrepreneurs with ideas for social businesses would float their business plans on the trading floor where investors would have the opportunity to fully consider proposals. The total cost for the setting up of such a exchange would be $400,000 per annum. Over time, within five years, as the Australian social economy matures, it is expected that the trading floor would become self sufficient.

Contact details

Peter Botsman 
Ph: 02 44-65-1665 
Fax: 02 44-65-2305 
pbotsman@bigpond.com